The primary owner of the Bangor Mall is at risk of defaulting on an $80 million loan that uses the mall as collateral, according to industry analysts.
Simon Property Group of Indianapolis took out the loan in 2007 and has made only interest payments. In late August, with the 10-year loan’s maturity date fast approaching, lender Morgan Stanley Capital turned the loan over to a special servicer that handles troubled debts.
Simon had been unable to get the loan refinanced, indicating it is at risk for default.
The problem lies in the mall’s value. Back when Simon took out the loan, the mall was appraised at $128 million. Since then, of course, shopping malls around the nation have struggled as online purchases have skyrocketed.
A recent Morningstar Credit Ratings report valued the Bangor Mall at only $66.6 million and estimated that Simon has a 50 percent chance of defaulting on the loan.
Financial experts started scrutinizing the mall last spring, when it lost Macy’s, one of its four anchors. Leases for two other anchors, J.C. Penney and Sears, are up for renewal within the next two years. The mall’s fourth anchor is Dick’s Sporting Goods.
“There’s lots of risk here,” Orest Mandzy, managing editor of Commercial RealEstate Direct, an industry publication, said of the Bangor Mall. “And loans to malls aren’t popular now.”
LNR Partners of Miami Beach, Florida, will appraise the mall, determine whether it is worth less than the $80 million loan and recommend either restructuring the loan or foreclose on the mall. The company, which was hired by the lender, did not respond to a call for comment.
What happens with the Bangor Mall largely depends on the appraisal, whether J.C. Penney and Sears renew their leases and whether a new tenant moves into the space formerly occupied by Macy’s, Mandzy said.
J.C. Penney plans to stay at the mall, spokesman Joey Thomas said Tuesday. “We don’t comment on lease activities, but we currently have no plans to close our J.C. Penney location at Bangor Mall.” Meanwhile, Sears spokesman Howard Riefs said, “We won’t speculate about the future.”
Data analysis company Trepp Inc. figured the mall’s occupancy rate was about 88 percent as of March, down from a high of 98 percent in 2012, Mandzy said.
The Bangor Mall is the largest mall in northern Maine, a factor experts said might help it survive.
Simon, one of the largest U.S. mall companies, also runs Kittery Premium Outlets and has a good reputation for managing shopping centers. But it has sold some troubled properties, Mandzy said.
The company declined to discuss the Bangor Mall.
“I can’t talk about loan financing or special servicing. I don’t know the state of the loan. We have 200 properties,” Les Morris, a Simon Property spokesman, said. “And we do not disclose occupancy rates.”
This isn’t Simon’s first go-round with distressed debt. In 2015, it stopped payments on a $45 million loan against Greendale Mall in Worcester, Massachusetts. And in July 2016 Simon’s lender foreclosed on that property. Greendale was appraised at just $14.7 million, and leases for three of its five tenants were due to expire within a couple of years.
The company also let a loan on Hilltop Mall near San Francisco be foreclosed on this spring after that mall’s appraisal came in well under the loan’s amount. That mall was sold in August and may be redeveloped into a combination of retail, residential and office space.
Simon owns 87.6 percent of the Bangor Mall, with California Public Employees’ Retirement System and the state of Michigan Treasury owning the rest.